Stocks Shoot Higher as Oil Takes Tumble
Stocks opened higher as Wall Street sought to regain its footing following Friday's dramatic oil-inspired selloff.
Major indexes moved comfortably higher as oil dropped nearly $3 a barrel and despite a sharp drop in Lehman Brothers shares after the venerable investment bank said it will raise $6 billion in new capital. The company expects to report a $2.77 billion second-quarter loss.
But oil once again seemed to be the dominant force in the market. The price dropped below $136 a barrel after an unprecedented $11 surge Friday to more than $138 a barrel.
Analysts were expecting a continued pattern of choppy trading, with the Lehman news adding to a general sense of uncertainty about which way the market is heading.
"Until we get some clarity, until these problems at the Lehman Brothers of the world go by the wayside ... then we could probably see some of this money come and hit the market," said Jack Bouroudjian, a principal at Brewer Investment.
On the sales front, Dow component McDonald's said its same-store sales for May rose 7.7 percent helped by brisk business at is international locations. Shares were up 2.3 percent in premarket trading.
In research published Monday, Lehman Brothers analysts said they expect U.S. large-cap banks to incur losses of $79 billion this year, and cut earnings and share price targets for a number of U.S. banks including Citigroup, Bank of America, Wachovia and JP Morgan.
Lehman also cut European stocks to "underweight" and raised U.S. stocks to "overweight", saying that a hike in the European Central Bank's key interest rate would likely affect stock markets on the continent.
Meanwhile, the global credit crisis may last between two and four years, according to fund manager BlackRock , as more writedowns by banks are likely because of a weakening UK economy.
In more financial news, CIT Group , a commercial finance company hurt by debt issues, said it is getting a $3 billion cash infusion from Goldman Sachs. CIT shares surged on the news.
There is no economic data scheduled before the bell, but theNational Association of Realtors will releasepending home sales numbers, at 10 am New York time. Analysts surveyed by Briefing.com expect the index to have dropped by 1 percent in April, the same decline as in March.